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In Work Poverty

Understanding In Work Poverty

What is In Work Poverty?

In Work Poverty (or Income Poverty) is defined as those living in a household with an equivalent disposable income below 60% of the national median. Equivalent disposable income is the amount of money that households have available for spending and saving after direct taxes (such as income tax and council tax) have been accounted for, adjusted for household size and composition.

How big a problem is In Work Poverty?

In 2013 in the UK, 8% of people in employment, aged between 18 to 64, were identified as being in poverty (approximately 3 million people). The poverty rate for those in the same age group and not working was 31%. However, according to the Joseph Rowntree Foundation (a British social policy research and development charity) they believe the actual number of people affected are much higher, with more than half of the 13 million people experiencing poverty in the UK living in a household where at least one person is working.

Data from the Office of National Statistics between 2007 and 2012, for those aged between 18 to 59 who were in poverty, but then entered employment, show 30% remaining in poverty, despite entering employment.

Increased rates of poverty within working families, due primarily to falls in real earnings, also acted to increase overall child poverty, according to the Institute for Fiscal Studies. The rate of child poverty in working families rose from 19% to 21% between 2009/10 and 2003/14.

How can people leave In Work Poverty?

The ways in which people can exit In Work Poverty are varied and complex, with many factors potentially having an impact simultaneously. However, according to the Office of National Statistics, employment-related events can be significant. For those leaving In Work Poverty between 2007 and 2012, 70% experienced an increase in hourly earnings of 5% or more, either as a result of a change in job or experiencing an increase through their current employment. An increase in the average number of hours that somebody works was a factor in 38% of people transitioning out of In Work Poverty. Overall, 83% of those leaving In Work Poverty experienced at least one employment change.

What can employers do about In Work Poverty?

Research from the Joseph Rowntree Organisation has suggested that organisations who are willing to adopt a range of different practices will not only tackle issues associated with In Work Poverty, but boost productivity, motivation and loyalty among their workforce, which in turn can reduce absenteeism and staff turnover costs.

Practical ideas include:

  • Supporting pay that meets or exceeds the Living Wage (ie the voluntary hourly rate set independently and updated annually by the Living Wage Foundation, currently set at £8.25 per hour)
  • Adopting flexible working practices to help reduce the stress of balancing work and home life, whilst enabling more cost effective family care options to be accessed.
  • Implementing more innovative benefit options, in consultation with staff, such as assistance with travel and childcare costs, providing a staff discount scheme, or temporary loans, to help reduce the overall cost of living.
  • Providing structured recruitment, training and development to help employees progress to better jobs and higher wages.
  • Raising awareness of In Work Poverty and providing financial education to help staff understand changes to taxation, pension rules and contributions, as well as the importance of financial planning and budgeting.

FREE InfographicUnderstanding in Work Poverty Print

For further information regarding financial education you may also like to read: Financial Literacy – why does it matter to employers?

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